Decision

Previous regulatory judgement: Your Housing Group Limited (29 June 2022)

Updated 28 February 2024

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Your Housing Group Limited

• Regulatory code: L4203

• Publication date: 29 June 2022

• Governance grade: G2

• Viability grade: V2

• Reason for publication: Changed basis for viability and governance grades

• Regulatory route: In Depth Assessment

This regulatory judgement confirms the regulator’s existing G2/V2 assessment of Your Housing Group Limited’s (YHGL) governance and viability.

YHGL was downgraded to G2 in February 2020 due to a lack of clarity about its strategy, material shifts in plans and because a number of abortive projects and schemes had limited the board’s ability to measure performance over time in delivering its strategic priorities. Underperformance against delivery of YHGL’s objectives had not been robustly considered and there was evidence of under-investment in its existing homes. YHGL’s board had not demonstrated that it had ensured effective use of resources in line with its objectives and charitable status.

In a further judgement published in December 2020, we regraded YHGL’s viability from V1 to V2. Following an external review, YHGL had substantially increased its forecast asset management spending, resulting in increased debt, a weaker financial profile and reduced operating margins. In addition, a failure to achieve significant planned cost savings would increase YHGL’s need for additional funding and further reduce operating margins.

Based on evidence gained from an In Depth Assessment, the regulator has assurance that YHGL continues to comply with the Governance and Financial Viability Standard. Since the downgrade to G2, YHGL’s leadership has been strengthened including through an increase in social housing sector specific skills and experience on its board.

YHGL has a new corporate strategy and has evidenced that resources are being used more effectively to achieve intended outcomes. Legacy projects have been reviewed and a more robust process is in place to ensure decision making reflects YHGL’s strategic priorities. YHGL has improved its approach to asset management to support the development and delivery of investment plans for its homes. These plans, and the underlying stock data, have been externally validated and there is increased capacity, including new executive leadership, to support ongoing delivery.

However, YHGL has further work to do to strengthen its risk management and the adequacy of its internal controls, particularly within the finance function. Recent internal audits have highlighted control weaknesses. Notably, a review of rent and service charge setting identified wide ranging errors, which YHGL self-referred to the regulator. Following investigation, we have concluded that YHGL has not complied with the Rent Standard 2020 or the legislative requirements of the Welfare Reform and Work Act 2016. We have set out our findings in a separate Regulatory Notice.

YHGL needs to ensure that it has a stable finance function with sufficient management oversight in order to maintain a strong control framework. Executive leadership in the finance function has been strengthened but a transformation plan, alongside data and process improvements to deliver efficiency savings, is still to be delivered.

YHGL has an adequately funded business plan with sufficient security in place. The plan is built on reasonable assumptions and has been subjected to an appropriate range of stress tests and mitigations have been identified.

However, YHGL’s planned level of asset management spending, including building safety works, required renegotiation of lender covenants in 2019, to create headroom on interest cover. The financial profile continues to be weak over the short to medium term and significant efficiency savings are required to achieve forecast financial performance and maintain covenant headroom. YHGL also has some reliance on forecast sales surpluses in 2023.

Other providers included in the judgement

Your Housing Limited, Frontis Homes Limited, Ascent Housing LLP

About the provider

Origins

YHGL is a charitable community benefit society, a registered provider and the non-asset holding parent of the Group.

Registered Entities

There are three registered providers. Your Housing Limited is the principal operating subsidiary and is a charitable community benefit society formed in July 2017, following group consolidation. Frontis Homes Limited is a non-charitable community benefit society. Ascent Housing LLP, a for profit registered provider, holds no stock and has applied to de-register.

Unregistered Entities

There are two active non-registered subsidiaries within the group:

• Nuvu Development Limited is a property development company.

• Nuvu Living LLP, a property partnership, is 99.99% owned by YHG and 0.01% by Nuvu Development Limited.

Geographic Spread and Scale

The group is based in Warrington and operates across the North West, Yorkshire and the Midlands. YHG owns and manages around 26,700 homes. The majority of its homes are for general needs, but it also provides supported housing, retirement living, key worker and shared ownership housing.

Staffing and Turnover

The group employs the full-time equivalent of 1,045 staff. Its turnover for the year ended 31 March 2021 was £153.8m.

Development

YHG’s 2022/23 business plan includes development of 2,265 units over the next five years. This includes commitments made through its strategic partnership with Homes England.

About our judgements

Key to Grades

Governance:

	Compliant
G1	The provider meets our governance requirements.
G2	The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.

	Non-compliant
G3	The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
G4	The provider does not meet our governance requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Viability:

	Compliant
V1	The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
V2	The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.

	Non-compliant
V3	The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
V4	The provider does not meet our viability requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Definitions of Regulatory Routes

In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.

Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.

Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.

Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.

For further details about these processes, please see Regulating the Standards.